Technovation 35 (2015) 32–45

Contents lists available at ScienceDirect

Technovation
journal homepage: www.elsevier.com/locate/technovation

Open search strategies and firm performance: The different

moderating role of technological environmental dynamism
Jorge Cruz-González a,b,n, Pedro López-Sáez b,c,1, Jose Emilio Navas-López c,2,
Miriam Delgado-Verde b,c,1
a
Department of Organization and Management, CUNEF School of Business and Finance, C/Leonardo Prieto Castro 2, Ciudad Universitaria,
28040 Madrid, Spain
b
Ikujiro Nonaka Reseach Centre on Knowledge and Innovation, CUNEF School of Business and Finance. C/Leonardo Prieto Castro 2,
Ciudad Universitaria, 28040 Madrid, Spain
c
Department of Business Administration, Faculty of Economics and Business, Complutense de Madrid University, Campus de Somosaguas, s/n. 28223,
Pozuelo de Alarcón, Madrid, Spain

art ic l e i nf o a b s t r a c t

Available online 23 September 2014 Mainly driven by the rapid progress of the ‘open innovation’ paradigm, previous research has devoted
Keywords: considerable efforts in investigating how the degree of openness to external knowledge influences firms'
Open search strategy innovation performance. However, much less is known about its impact on performance at the firm
External search breadth level. Moreover, the question of which open search strategy is more suitable depending on environ-
External search depth mental features is unresolved. We focus on breadth and depth as two distinct open search strategies and
Technological environmental dynamism claim that, besides their different benefits in terms of learning and innovation, it is also necessary to
Firm performance consider their costs. Based on survey data of 248 high-technology manufacturing Spanish firms, this
study extends recent research about the context dependency of openness effectiveness by showing that
the effect of these two open search strategies on perceived firm performance is contingent with
technological environmental dynamism in a reverse fashion. While search breadth is found to be
positively associated with performance in less technologically dynamic environments, it seems to hurt
performance in more dynamic contexts. On the contrary, while search depth is found to have a positive
effect on performance in highly technologically dynamic environments, it appears to harm firm
performance in more stable contexts.
& 2014 Elsevier Ltd. All rights reserved.

1. Introduction
Open innovation has become one of the hottest topics in recent
literature (Linton, 2012; West and Bogers, 2014). Since the pub-
lication of Chesbrough's (2003) book, there has been a great
proliferation of empirical works investigating how a higher degree
of openness to a diversity of external sources affects different
facets of firms' innovativeness (e.g. Chang et al., 2012; Escribano
et al., 2009; Leiponen and Helfat, 2011; Nieto and Santamaría,
2007; Sidhu et al., 2007). Overall, findings reported in these
studies indicate that the wider the search for external knowledge,
n
Correspondence to: Colegio Universitario de Estudios Financieros (CUNEF),
Departamento de Organización y Dirección de Empresas, C/Leonardo Prieto Castro
2, Ciudad Universitaria, 28040 Madrid, Spain. Tel.: þ 34 914480892;
fax: þ34 915933111.
E-mail addresses: jorge.cruz@cunef.edu (J. Cruz-González),
pedro.lopez@ccee.ucm.es (P. López-Sáez), jenavas@ccee.ucm.es (J.E. Navas-López),
miriamdv@ccee.ucm.es (M. Delgado-Verde).
1
Tel.: þ34 913942971; fax: þ 34 913942371.
2
Tel.: þ34 913942503; fax: þ 34 913942371.
the higher the firm's innovation performance. This evidence has
led to draw conclusions like “increasing degrees of openness will
stimulate innovative activities, creation of new ideas, and ulti-
mately higher performance” (Knudsen and Mortensen, 2011: 56),
or that “the open innovation process is becoming an essential
success factor for all sorts of enterprises” (Badawy, 2011: 65).
By focusing on the success side of external search, these initial
studies have given rise to an optimistic view of openness
(Huizingh, 2011; West and Bogers, 2014). However, external
knowledge search is not costless. Yet, to date, the literature has
been imbalanced in its strong focus on the benefits of openness
and only some recent works have begun to stress that openness
can also have considerable downsides that would explain why
not all firms success with open innovation initiatives (Birkinshaw
et al., 2011; Chen et al., 2011; Knudsen and Mortensen, 2011).
Without considering the cost or pains of external search, only
one part of the story is told and, hence, conclusions derived from
previous works analyzing the effects of openness on innovation
outputs or innovation success may be biased. In this vein, there is
no systematic evidence about the impact of open search on overall

http://dx.doi.org/10.1016/j.technovation.2014.09.001
0166-4972/& 2014 Elsevier Ltd. All rights reserved.
 J. Cruz-González et al. / Technovation 35 (2015) 32–45
firm performance, and the scarce empirical works that have
investigated this relationship offer mixed results (e.g. Belderbos
et al., 2010; Faems et al., 2010; Hung and Chou, 2013; Sisodiya et
al., 2013). A common feature in all these analyses is their
conceptualization and measurement of openness as a unidimen-
sional construct. However, as highlighted by some scholars (e.g.
Chen et al., 2011; Laursen and Salter, 2004, 2006), different open
search strategies may yield different outcomes. This reasoning
provides a potential explanation for the observed inconsistency in
prior empirical research focused on the openness–performance
relationship. Nevertheless, to our known, no previous work has
theoretically or empirically addressed how different strategies for
external knowledge search relate to performance at the firm level.
Moreover, it may be that different open search strategies will
be more suitable under different environmental settings. Recent
contributions framed within open innovation research (Hsieh and
Tidd, 2012; Huizingh, 2011; Hung and Chou, 2013) have claimed
for a contingency approach and propose that external context
characteristics may determine the relationship between open
innovation practices and performance. However, the possible
context dependency of openness effectiveness is one of least
understood topics, making it imperative to investigate the mod-
erating effects of environmental circumstances that make the
investment in open innovation profitable (di Benedetto, 2010;
Hung and Chou, 2013; Sisodiya et al., 2013).
The present paper tries to shed some light on these gaps in
previous research by addressing the following key question: under
which environmental circumstances the gains of the different
open search strategies overcome their costs. This way, we aim at
contributing to the literature by providing further insight about
the great – but narrowly understood – complexity of external
knowledge search by organizations. Specifically, this study con-
tributes to current literature in three main aspects. First, it aims at
clarifying the mixed findings reported by the scarce empirical
works which have investigated the effect of openness on overall
firm performance. These preceding studies have considered open-
ness as a monolithic construct. Extending them, this study con-
siders two separate components of firms' open search strategies,
named external search breadth and depth (Laursen and Salter,
2006). Second, on a more theoretical level, this paper draws on
absorptive capacity arguments (Cohen and Levinthal, 1990) for
linking both open search strategies with the broader organiza-
tional learning debate on exploration and exploitation (March,
1991). Thereby, this paper contributes to the theoretical integra-
tion of three approaches that, although showing important com-
plementarities, have evolved almost independently in prior
literature (Laursen, 2012; Rosenkopf and Nerkar, 2001). Third,
based on the above theoretical linking, this study proposes, and
empirically finds, differing moderating roles of technological
environmental dynamism on the effect of external search breadth
and depth on perceived firm performance. In their recent study,
Hung and Chou (2013) have pioneered the empirical analysis of a
contingent model highlighting that contextual conditions may
affect firm performance derived from inbound open innovation.
Our findings extend their contingent model by showing that
different environmental settings may require that organizations
will deploy quite distinct open search strategies for improved
performance.
Results are based on survey and archival data of 248 large and
medium-sized high-technology manufacturing Spanish firms.
Below, we review prior literature on benefits, costs, and perfor-
mance implications of external knowledge search, frame the two
open search strategies, and present the hypotheses that drive the
analysis. After that, sampling and data collection procedures, as
well as measures of variables are explained. Then, we report the
empirical findings and conclude with a discussion of main results,
33
implications for research and practice, and future research
directions.
2. Literature review and hypotheses
2.1. External knowledge search and firm performance: benefits
versus costs of openness
The use of externally generated knowledge to improve internal
resources and innovation processes is not new. Rather, accessing
external knowledge has long been recognized as an important
factor in successful innovation and many companies have imple-
mented open innovation practices for a long time (Huizingh, 2011).
The bibliographic analysis carried out by Dahlander and Gann
(2010) shows that some of the most cited works by articles that
had ‘open innovation’ in the topic field are not necessarily framed
within open innovation literature. Specifically, external knowledge
acquisition has been addressed in different fields within manage-
ment and marketing literatures, such as market orientation (e.g.
De Luca and Atuahene-Gima, 2007; Jaworski and Kohli, 1993),
supply chain management (e.g. Groen and Linton, 2010; Lambert
and Cooper, 2000), complementary assets (e.g. Colombo, 2006;
Teece, 1986), intellectual capital (e.g. Subramaniam and Youndt,
2005; Yu, 2013), organizational learning (e.g. March, 1991; Sidhu
et al., 2007), absorptive capacity (e.g. Cohen and Levinthal, 1990;
Murovec and Prodan, 2009), evolutionary economics (e.g. Laursen,
2012; Nelson and Winter, 1982), or dynamic capabilities (e.g.
Danneels, 2008; Voudouris et al., 2012). This observation has led
some critics to assert that open innovation is old wine in new
bottles (Trott and Hartmann, 2009), while other scholars have
initiated a debate about whether it constitutes a real new field of
study or, by contrast, a barrier that inhibits communication
between different groups of academics for theory development
(Groen and Linton, 2010). Proponents of open innovation also
recognize that it links into broader debates in innovation and
management. Nonetheless, they argue that it offers a more
comprehensive perspective of external knowledge search for
innovation, providing an umbrella that integrates a wide range
of already existing activities, redefining the boundary between
firms and the environment and, ultimately, leading academics and
practitioners to rethink the design of innovation strategies in a
networked world (Badawy, 2011; Huizingh, 2011; Laursen and
Salter, 2006; van de Vrande and de Man, 2011).
In Chesbrough's (2003) sense, open search consists on organi-
zations' permeability or openness to the acquisition of new ideas
and knowledge from outside (von Hippel, 2010). It is argued that
external search plays a key role in achieving variety through the
identification and acquisition of new information and ideas that, in
combination with their internal knowledge base, lead firms to
generate solutions for emerging problems and new opportunities
(Laursen, 2012; Voudouris et al., 2012). Consequently, by spanning
organizational boundaries, firms can go beyond local search and
avoid competence traps associated to an excessive focus on
internal learning (Hung and Chou, 2013; Rosenkopf and Nerkar,
2001).
Rather than a binary classification of open versus closed,
openness is a continuum, ranging from closed approaches on
one end to open approaches on the other (Dahlander and Gann,
2010; Hsieh and Tidd, 2012; Lichtenthaler, 2011). Organizations
can gather external information through a wide range of sources,
such as suppliers, customers, competitors, other firms, universi-
ties, research organizations, industry associations, trade and tech-
nical publications, and so on, which may provide different kinds of
complementary knowledge. Accordingly, it has been argued that
a wider and more diverse search over a greater number of sources
34 J. Cruz-González et al. / Technovation 35 (2015) 32–45
will improve the chance of developing new organizational com-
petences and successful innovations based on the integration of
complementary knowledge sets from distinct external sources
(Leiponen and Helfat, 2010; Vega-Jurado et al., 2009). In this
regard, Laursen and Salter (2004) proposed that higher the
number of external knowledge sources from which a firm relies
upon, the more open its search strategy. More formally, Chang
et al. (2012) have defined openness capability as “a firm's ability to
search for diversified sources of creative ideas from external,
distant and wider orientations, rather than from internal, local
and narrow ones” (p. 448).
Prior empirical research has hypothesized and found a positive
relationship between a higher degree of openness, in terms of
search diversity, and innovation performance. For example, Sidhu
et al. (2007) found that a composite index capturing the three
dimensions of supply-side, demand-side and geographic search
has a positive effect on firms innovativeness, measured as the
percentage of total sales derived from new products. In a similar
vein, Leiponen and Helfat's (2011) found that a summary variable
reflecting the extent of external knowledge sourcing positively
influence firms' innovation output and its commercial success.
Additional evidence of a positive effect of openness on innovation
output and success (Escribano et al., 2009), the introduction of
radical and incremental innovations (Chang et al., 2012; Nieto and
Santamaría, 2007; Wang and Hsu, 2014), or the development of
second-order competences (Danneels, 2008), can also be found.
These contributions show the benefits of external search in
terms of learning and innovation. However, these works do not
consider the significant managerial challenges and financial and
cognitive costs of openness. First of all, higher degrees of openness
involve higher costs of information search and partnering
(Sisodiya et al., 2013). Environmental scanning requires resources
and time (Oerlemans et al., 2013). In order to identify and acquire
valuable external information from a variety of sources, it is
necessary to develop and maintain a network of gatekeepers
devoted to search and connect the firm with external agents. In
addition, different external knowledge sources require different
management approaches and organizational practices in order to
make the search process effective (Laursen and Salter, 2006).
Therefore, the higher the diversity of external sources from which
a firm draws upon, the wider the variety of required management
skills (Faems et al., 2010).
Once acquired, external knowledge needs to be fully integrated
into the firm's activities, so companies must develop the required
integration mechanisms to facilitate shared communication (West
and Bogers, 2014). Some external sources may be quite distant
from the organization in terms of similarity of knowledge bases, so
the integration of ideas becomes harder (Dahlander and Gann,
2010). To benefit from external knowledge, organizations have to
deploy more complex and costly integration mechanisms. More-
over, firms need prior knowledge and competences to identify,
access, assimilate, and apply it efficiently (Chen et al., 2011; Cohen
and Levinthal, 1990; Hung and Chou, 2013), and even it may be the
case that external knowledge needs to be transformed in order to
become understandable by the organization (Todorova and
Durisin, 2007).
Thirdly, the implementation of open innovation initiatives may
be impeded by negative attitudes of employees toward externally
generated knowledge. This ‘not invented here’ (NIH) syndrome
(Katz and Allen, 1982) may be embedded in the firm's corporate
culture, making it necessary to devote considerable time and
efforts in order to transform employee attitudes. For example,
Lichtenthaler et al. (2011) alluded to communication throughout
the company, top management support, establishment of sui-
table incentives, modification of organizational structures, and
institutionalization of open search attitudes in the corporate
culture. Fourth, the span of attention problem shows that there
are cognitive limits to how much information can be understood
(Chen et al., 2011; Dahlander and Gann, 2010; Laursen, 2012).
Laursen and Salter (2006) extended this reasoning to managers
arguing that managerial attention is the most precious resource
that a firm possesses and that maintaining many external relation-
ships is highly costly in terms of diversion of managerial attention.
Fifthly, an important concern of openness relates to the risk that
internal knowledge that the firm does not want to share may leak
to undesired agents and competitors (Chen et al., 2011; Grimpe
and Sofka, 2009), which forces firms to manage practical chal-
lenges in resolving intellectual property ownership issues
(Birkinshaw et al., 2011; Grimpe and Kaiser, 2010).
Recent evidence has highlighted that the above costs may
offset the benefits of openness, or even surpasses them. In this
regard, contrary to their expectations, Knudsen and Mortensen
(2011) found that increasing openness at the project level exhibits
a negative effect on product development performance, leading to
slower and costly projects compared to projects with less open-
ness. Other scholars have addressed firm's ‘over-search’, that is,
whether beyond an optimal level, firms that rely on an increasing
variety of external sources experiment decreasing returns in terms
of innovation performance. Results reported in these studies
confirm the over-search hypothesis by proving the existence of
an inversed U-shaped relationship between external search diver-
sity and the number of approved patents (Yu, 2013), the likelihood
of introducing any technological innovation (Leiponen and Helfat,
2010), the share of turnover generated by improved and/or new to
the market products (Grimpe and Kaiser, 2010; Laursen and Salter,
2006; Oerlemans et al., 2013), or a composite index capturing
various facets of innovative performance (Chen et al., 2011).
All studies mentioned so far have focused on innovation
performance indicators as dependent variable. However, there is
little empirical research which investigates the effect of the degree
of openness on performance at the firm level, an approach that
truly would enable to ascertain whether the gains of external
search overcome its cost or not, i.e., whether high degrees of
openness are profitable (Faems et al., 2010; Sisodiya et al., 2013).
The scarce empirical works that have investigated this relationship
do not enable to answer this question due to the so disparate
results they report. For instance, while Hung and Chiang (2010)
found that firm's proclivity to open innovation has a positive effect
on perceived firm performance, Goerzen and Beamish (2005)
found that a more diverse alliance network is negatively related
to this variable. Furthermore, Lichtenthaler et al. (2011) classified
companies according to their attitudes towards transferring tech-
nology, and found that those firms that actively absorb external
technology exhibit higher return on sales than those characterized
by a quite limited implementation of inbound open innovation. By
contrast, Faems et al. (2010) found that, besides the positive
indirect effect of technology alliance portfolio diversity on firm
financial performance via increased product innovation perfor-
mance, this diversity of the technology alliance portfolio has a
stronger direct cost-increasing effect, revealing an aggregated
negative effect of diversity on profit margin. Moreover, recently
Hung and Chou (2013) and Sisodiya et al. (2013) have found a
positive impact of inbound open innovation on long-term firm
performance, measured through Tobin's q, while Belderbos et al.
(2010) found that the share of collaborative technological activities
in a firm's technology portfolio decreases its financial perfor-
mance, measured by the same indicator.
All of these works conceptualize and measure openness as a
unidimensional construct. However, companies may conduct dif-
ferent open search strategies that may yield different outcomes
(Laursen and Salter, 2004). This could explain the lack of consensus
in prior empirical research regarding the relationship between
 J. Cruz-González et al. / Technovation 35 (2015) 32–45
openness and firm performance. Thus, in the next subsection we
describe external search breadth and depth as two distinct open
search strategies.
2.2. Search breadth and depth as two distinct open search strategies
As previously mentioned, Laursen and Salter (2004) defined
openness as the number of different external knowledge sources
that a firm draws upon. In a subsequent work, one of the most
cited in the field (see Dahlander and Gann, 2010), these authors
built on and extended Katila and Ahuja's (2002) contribution on
search inside the firm and developed the concepts of external
search breadth and depth as “two components of the openness of
individual firms' external search strategies” (Laursen and Salter,
2006: 131). Specifically, their definition of external search breadth
matches the concept of openness, as it was defined in their 2004
article: “the number of external sources or search channels that
firms rely upon in their innovative activities” (Laursen and Salter,
2006: 134). The second concept, external search depth, is the new
one and it is defined as “the extent to which firms draw deeply from
the different external sources or search channels” (pp. 134–5). They
argued that, together, these two variables represent the openness of
a firm's external search processes.
Search breadth and depth extend the concepts of exploration
and exploration (March, 1991). In this regard, adopting the internal
learning perspective followed by Katila and Ahuja (2002), the
concept of search depth, that is, how the firm reuses its existing
knowledge, fits with the idea of exploitation, whereas search
scope, or how widely the firm explores new knowledge, is closer
to exploration. However, it is less clear whether this logic remains
the same when the search phenomenon is analyzed from an
external point of view.
Laursen and Salter (2006) found that more radical the innovation,
traditionally considered as an output of explorative learning (e.g. He
and Wong, 2004), the less effective external search breadth and the
more effective external search depth in influencing innovation
performance. Their results indicate that the contribution of search
breadth and depth to exploratory and exploitative learning may vary
drastically depending on whether the analysis is performed on
internal or, conversely, on external knowledge search. By contrast,
the results obtained by Chiang and Hung (2010) seem to indicate just
the opposite. These authors found that open search breadth was
positively related to radical product innovation performance and had
no effect on incremental product innovation performance, whereas
open search depth did not affect radical product innovation perfor-
mance and had a positive influence on incremental product innova-
tion performance.
Based on absorptive capacity arguments, this paper suggests
that the concepts of external search breadth and depth, as defined
by Laursen and Salter (2006), relate to exploratory and exploitative
learning just the opposite that when they are applied to knowl-
edge search inside the firm. Recall that external search breadth is
the number of different search channels that a firm draws upon,
while external search depth is the number of different search
channels that a firm draws upon deeply or intensely. Intensity is a
key aspect here (Hsieh and Tidd, 2012). Thus, external search
breadth should be understood as shallow in nature. Although this
kind of search leads firms to identify and obtain new valuable
information and knowledge from a wide number of external
parties, its superficial character only allows to incorporate incre-
mental improvements into the organization's current knowledge
base. This is because the ability of firms to recognize the value of
new external information, assimilate it, and apply it is a function of
their prior knowledge in related areas, making it difficult for firms
to understand, and hence benefit from external knowledge in
distant fields (Cohen and Levinthal, 1990). As the company
35
deepens into the knowledge of external agents, this becomes
more easily understandable, enabling the organization to obtain
valuable distant knowledge that could not be acquired through a
more superficial search (Hsieh and Tidd, 2012).
Descriptive statistics of existing works that empirically analyze
external search breadth and depth support this reasoning. In all
cases, they show that, on average, external search depth is much
less common than breadth (Chen et al., 2011; Chiang and Hung,
2010; Keupp and Gassmann, 2009; Laursen and Salter, 2006;
Schweitzer et al., 2011). It is commonly accepted that firms tend
to search locally, i.e., to overemphasize the exploitation of knowl-
edge in related domains (e.g. Belderbos et al., 2010; Danneels and
Sethi, 2011; Laursen, 2012; Levinthal and March, 1993; Sorensen
and Stuart, 2000; Uotila et al., 2009). Therefore, these preliminary
results support the idea that external search breadth is closer to
exploitation of current knowledge or, at most, to knowledge
exploration in related areas, whereas external search depth leads
more to exploration of new knowledge in distant fields. Findings
obtained by Belderbos et al. (2010) also back up this logic, as they
find that those firms more intensively engaged in collaborative
technological activities show higher levels of technological
exploration. Belderbos et al. (2010) do not differentiate between
external search breadth and depth, but they capture collaborative
technological activities by the share of patent applications jointly
owned by the focal firm and an external partner, which is likely to
be the result of a deep relationship among partners. In a similar
vein, Hsieh and Tidd (2012) found that more novel (i.e., explora-
tory) development projects were associated with a higher inten-
sity of interaction with external actors and the use of richer
mechanisms for interfirm knowledge-sharing.
Therefore, external search breadth could be assimilated to the
concept of ‘external boundary-spanning exploration’ of the
exploration typology proposed by Rosenkopf and Nerkar (2001),
that is, when the firm “utilizes knowledge from its own techno-
logical domain, but obtains the knowledge from external sources”.
On the other hand, external search depth would contribute to
perform ‘radical exploration’, that is, to “build upon distant
technology that resides outside of the firm” (Rosenkopf and
Nerkar, 2001: 290).
2.3. The moderating role of technological environmental dynamism
Although proponents of open innovation tend to offer universal
positive prescriptions, some scholars have recently argued that the
outcomes of openness may be very sensitive to context and
contingency (e.g. di Benedetto, 2010; Hsieh and Tidd, 2012;
Huizingh, 2011), but little is understood about it. In this regard,
Escribano et al. (2009) found that environmental turbulence
enhances the moderating role of absorptive capacity on the
relationship between external knowledge search and firm's inno-
vation performance. More recently, Sisodiya et al. (2013) have
shown that the higher the network spillovers on a firm's industry,
the stronger the positive moderating effect of relational capability
on the open innovation–financial performance relationship.
Furthermore, Hung and Chou's (2013) findings indicate that
technological and market turbulence positively moderate the
effect of external technology acquisition (i.e. inbound open inno-
vation) on firm performance. This evidence indicates that open
innovation initiatives may be particularly suited to increase
innovation and firm performance in turbulent and knowledge-
rich industries. However, a key question remains unresolved:
under which environmental circumstances are the different open
search strategies more suitable, i.e., their distinct benefits in terms
of learning, innovation, and ultimately adaptation, overcome their
associated costs. This paper focuses on a specific feature of firms'
external context, its degree of technological dynamism, arguing
36 J. Cruz-González et al. / Technovation 35 (2015) 32–45
that the higher the technological turbulence, the less effective
external search breadth and the more effective external search
depth in influencing firm's overall performance.
Environmental technological dynamism is defined as the rate
and unpredictability or volatility of technical change in the firm's
environment (e.g. Dess and Beard, 1984; Hung and Chou, 2013;
Jaworski and Kohli, 1993). This choice is due to the increasing
technological dynamism affecting a growing number of competi-
tive contexts, on the one hand, and to the dramatic consequences
of this kind of environmental dynamism for firms' knowledge and
capabilities, on the other (Hill and Rothaermel, 2003; Jansen et al.,
2006; Sidhu et al., 2007; Uotila et al., 2009).
In non-turbulent or relatively stable technological regimes, the
value of organizational resources, knowledge and capabilities
keeps up for a longer time, so firms will benefit from improving
and exploiting their current knowledge. By contrast, in highly
technological dynamic contexts, prior knowledge and compe-
tences become rapidly obsolete, so firms need to reconfigure their
knowledge-base and build new competences quickly (Danneels,
2008; Escribano et al., 2009; Hung and Chou, 2013). In other
words, while stable technological contexts demand enhancing
core competences, this leads to organizational inertia in turbulent
environments (Leonard-Barton, 1992). Accordingly, firms facing
dynamic technological contexts should move beyond local search
and explore new knowledge domains in order to reconfigure their
knowledge repository and to arrive at innovations that depart
from existing technologies and markets (Jansen et al., 2006; Lavie
et al., 2010; Rosenkopf and Nerkar, 2001).
The above argumentation seems to point that “paradoxically,
the systems that help ensure organizational survival in stable
environments contribute to inertia and organizational decline
when the company is confronted with rapid change” (Hill and
Rothaermel, 2003: 260). We translate this reasoning to the open
search debate and argue that in relatively stable technological
contexts, the required minor adjustments can be achieved through
external search breadth at a lower cost than depth. Maintaining
strong and frequent interactions with a large number of external
sources is problematic and exacerbates the costs of openness
(Chiang and Hung, 2010). In addition, external search depth may
provide firms with too much and too distant new knowledge that
is unnecessary for addressing the incremental improvements
demanded by a non-turbulent technological environment. There-
fore, in this kind of contexts, external search breadth provides
enough variety at lower costs, leading to higher firm performance.
In turn, those firms conducting external search depth will not
recover most of the higher cost associated to this open search
strategy, and hence their performance will decrease.
On the contrary, we expect that firms that rely deeply on more
external sources to be adaptable to rapid external changes in
technology, because they are able to build and sustain virtuous
knowledge exchanges and collaborations with external agents
(Laursen and Salter, 2006). Following Voudouris et al. (2012), in
complex and rapidly changing industries, the locus of innovation,
and consequently of firm's adaptation, lies within a network of
intense ties with various organizations that provides opportunities
for shared learning, transfer of know-how and resource exchange.
When technological dynamism is very high, external search
breadth is not enough to provide the required variety to face the
threat of obsolescence. Consequently, even though this open
search strategy entails lower costs, overall firm performance will
diminish due to lack of adaptability. Thus, the wide variety of
distant new knowledge obtained through open search depth
enables firms to develop new organizational capabilities based
on the combination of complementary knowledge sets that cannot
be fully acquired through external search breadth. Therefore, we
expect that in highly technologically dynamic environments the
gains of depth, in terms of adaptation, will overcome its greater
costs, leading to higher firm performance.
Based on the arguments presented so far, we agree with Hsieh
and Tidd's (2012) reasoning that “when the development task is
simple and sequential, a lower intensity of collaboration is
sufficient, but more complex or iterative tasks demand more
intensive collaboration” (p. 602). Accordingly, the following
hypotheses are proposed:
Hypothesis 1. Technological environmental dynamism negatively
moderates the impact of external search breadth on firm
performance.
Hypothesis 2. Technological environmental dynamism positively
moderates the impact of external search depth on firm performance.
3. Methods
3.1. Sampling and data collection procedures
This study gathered survey and archival data on Spanish firms.
When defining our target population, we focused on companies
that simultaneously fulfilled the three following criteria: (i) their
main activity have to be realized in a high-technology manufac-
turing industry; (ii) they have to be large and medium-sized firms;
and (iii) they have to be established companies.
Regarding the first criterion, as technological environmental
dynamism is one of our hypothesized variables, we opted for
carrying the empirical analysis on a multi-industry sample. Other-
wise (i.e. single-industry study), conclusions about the moderating
role of this external variable would be conservative (Martínez-
Sánchez et al., 2011; Sidhu et al., 2007). We decided to focus on
manufacturing firms because, in these industries, external knowl-
edge is applied into new products, which are crucial for the
strategic positioning of a firm relative to its environment
(Danneels and Sethi, 2011). Additionally, these companies acquire
knowledge from a wide range of sources (Laursen and Salter,
2006). However, embracing all manufacturing would introduce
too much intrafirm heterogeneity. In order to reduce it, only high-
technology industries were selected. Specifically, we examined
firms operating in the seven most R&D intensive manufacturing
sectors (European Classification of Economic Activities –NACE Rev.
2– codes 20 chemical; 21 pharmaceutical; 26 computer, electronic
and optical products; 27 electrical equipment; 28 machinery and
equipment n.e.c.; 29 motor vehicles, trailers and semi-trailers; and
30 other transport equipment). As firms in these industries have to
cope with external changes in technology, it constitutes an
adequate context to develop this study.
Concerning the second criteria, namely, the size of companies,
we focused on large and medium-sized firms. In doing so, we
followed the ‘staff headcount criterion’ recommended by the
European Commission (see Recommendation 2003/361/EC), thus
establishing a minimum threshold of 50 full-time employees for
being considered as part of the study. We did not study small
companies because, compared to larger firms, this kind of organi-
zations find it more difficult drawing on a high number of external
knowledge sources (Zahra and Nielsen, 2002), especially for those
activities that require higher formalization and financial invest-
ments (van de Vrande et al., 2009).
Finally, the study focused on incumbent firms for three reasons.
First, as in the case of small companies, it may be difficult to observe
a high degree of external search – in terms of the number of sources
– in new ventures due to a lack of the required relational capital
and partnership network (Nieto and Santamaría, 2007). Second, the
antecedents of firms' success in new ventures may differ from
established companies (Zahra and Bogner, 2000), and third, as
 J. Cruz-González et al. / Technovation 35 (2015) 32–45
explained below, some of the questionnaire items were referred to
the last five years in order to limit concerns on reverse causality.
Consequently, only established firms with at least five years old
were considered in this study.
SABI database (Bureau van Dijk) was used to develop the
sampling frame. 1188 firms simultaneously fulfilled the three
above criteria. However, to increase comparability among firms
in the population, we manually checked all cases to ensure that
non-profit organizations, recently acquired companies, and firms
that were mainly distributors were not included. After this screen-
ing, 46 companies were removed. Thus, 1142 firms shaped our
final population.
Data about main variables were collected through telephone
survey, which was performed by a polling company. This company
conducted interviews using Computer Aided Telephone Interview-
ing (CATI), which enables real time verification of numerical
responses and rotation of item lists. To avoid common method
bias, we collected data for the dependent and independent
variables from two distinct informants. Based on prior empirical
research relying on ad-hoc survey for collecting data about firm
performance (e.g. He and Wong, 2004) and environmental dyna-
mism (e.g. Danneels and Sethi, 2011), we identified the CEO of the
company as the first informant for overall firm performance and
technological environmental dynamism. Only when it was not
possible to contact the CEO, we identified the head of corporate
marketing or sales director as an alternative respondent for these
variables. This type of senior executives with marketing responsi-
bilities has also been extensively used in prior studies as infor-
mants on performance and environmental dynamism (e.g.
Jaworski and Kohli, 1993). Their position as top managers makes
them to be well aware about their firm's performance in compar-
ison to main competitors. Furthermore, the marketing function
has a deep understanding of the firm's external environment as it
is the responsible of selling the firm's products, so it is well
positioned for receiving actual information about changes not only
in customers' demands, but also on technological features and
performance of competing products. Accordingly, we consider that
the head of corporate marketing or sales director constitutes a
valid alternative informant for those cases in which the CEO was
not available.
The second informant was the head of R&D (or equivalent
according to firm's structure), to whom we addressed questions
regarding open search strategies and some control variables. This
kind of informants with technological responsibilities has been
used in prior studies as the source of information for collecting
data about firms' openness towards external knowledge (e.g.
Chang et al., 2012; Hung and Chou, 2013).
The survey was conducted from April to July 2012. After this
period, we obtained 252 matched pairs with the data from both
respondents. Of these, four were eliminated as invalid. Thus, the
final sample comprised 248 firms (21.7% as response rate). The first
respondent (77% CEOs and 23% senior marketing executives) of
these 248 companies had on average 14.2 years of tenure in their
firm and 17.8 years of experience in their firm's industry. The
second informant (all of them senior executives with technical
functions: e.g. head of R&D) had mean company tenure of 10.5
years and 14.4 years of experience in their firm's industry. This
expertise further supports the validity of both informants for
reporting data about their organization and its environment.
The sample showed a spread across industries quite similar to
the observed in the population. The average firm size was 158.07
(s.d. ¼250.62) full-time employees and average age was 30.88
(s.d. ¼17.77) years. To test for representativeness and non-
response bias, we examined differences between final sample
and total population, as well as between respondents and non-
37
respondents. T-tests showed no significant differences based on
the number of full-time employees and firms' age.
3.2. Measures
3.2.1. Dependent variable
Firm performance was measured through six items (see
Appendix A) included in the questionnaire addressed to the first
informant (CEO). These indicators are based on Venkatraman's
(1989) subjective scale for firm performance, which has been
widely used and adapted in subsequent publications (e.g. Chiva
and Alegre, 2009; De Clercq et al., 2013; De Luca and Atuahene-
Gima, 2007). In the survey, respondents were asked to rate on a
seven-point Likert-type scale their firm's performance in the last
tax year (2011) compared to its main competitors. In line with
recent empirical research (e.g. De Clercq et al., 2013; Oerlemans et
al., 2013), in order to reduce concerns on endogeneity and reverse
causality, we explicitly indicated the specific year or time period to
which each block of questions was referred to and introduced lags
between independent and dependent variables. This procedure
also captures the fact that some time is required before externally
acquired knowledge will affect firm performance. Cronbach's
alpha coefficient indicates a good internal consistency of the scale
(α ¼.89). The final measure consisted on the average of the scores
on the six items.
3.2.2. Independent variables
To measure the two discussed open search strategies, we
followed Laursen and Salter (2006) procedures. In carrying out
their empirical analysis, these authors constructed their measures
based on data available in the UK Innovation Survey. As in
subsequent works (Chen et al., 2011; Chiang and Hung, 2010),
we obtained the information for measuring both strategies from
the questionnaire addressed to the second informant (Head of
R&D). Specifically, we asked respondents to indicate on a seven-
point Likert-type scale the importance of 16 external sources of
information and knowledge for their firm's innovation activities
during the last five years (2007–2011) (see Appendix B). A ‘1’
means that the company did not use the given source, while a ‘7’
means that it is a key source of information and knowledge for the
organization. In the questionnaire, we substituted the three
specialized sources originally considered by Laursen and Salter
(2004, 2006) – technical standards, health and safety standards
and regulations, and environmental standards and regulations –
by the three following sources: other companies in the firm's
sector that are not direct competitors, companies operating in
other sectors, and patents (see Cassiman and Veugelers, 2006;
Chen et al., 2011; CIS, 2010; Leiponen and Helfat, 2010; OECD,
2005; Sidhu et al., 2007). Table 1 shows the degree of use of each
source in the sample. Overall, the results indicate that the most
important source is clients, followed by suppliers, fairs and
exhibitions, and competitors. This evidence provides further sup-
port to the argument that firms tend to search locally.
We used this set of answers for measuring external search
breadth (see Chen et al., 2011; Chiang and Hung, 2010; Keupp and
Gassmann, 2009; Laursen and Salter, 2006; and Schweitzer et al.,
2011, for identical measurement of this variable). First, each of the
16 external sources was coded as a dummy variable, ‘0’ being no
use and ‘1’ being use of the corresponding knowledge source. In
practice, source i in firm j was coded ‘0’ when the Head of R&D
gave a score of 1 or 2 in the scale, whereas it was coded ‘1’ when
the response was 3–7. This procedure enables us to adapt the 0–3
scale available in the CIS and other official innovation surveys used
by Laursen and Salter (2006) to our 1–7 scale (as a robustness
check, an additional analysis – available upon request – based on a
38 J. Cruz-González et al. / Technovation 35 (2015) 32–45

Table 1
Degree of use of external knowledge sources.

Knowledge source Averagea Percentages

Not used (1) Low (2) Med.-low (3) Medium (4) Med.-high (5) High (6) Key (7)

1. Suppliers of equipment, materials, components, or software 4.58 4.8 8.1 11.7 14.1 32.7 18.5 10.1
2. Clients or customers 5.06 3.6 2.0 8.9 16.9 24.6 26.2 17.7
3. Competitors 4.02 10.1 13.3 17.7 13.3 21.0 18.5 6.0
4. Other enterprises in your sector that are not direct competitors 3.40 16.5 14.5 23.8 17.7 16.5 7.3 3.6
5. Other enterprises in other sectors 3.06 22.6 20.2 18.5 14.9 16.1 6.0 1.6
6. Experts/consultants 3.98 10.5 14.5 13.3 18.1 21.4 16.1 6.0
7. Commercial laboratories/R&D enterprises 3.88 14.1 11.7 15.3 16.1 23.8 11.3 7.7
8. Private research institutes 3.40 21.4 14.1 18.1 14.9 16.9 10.1 4.4
9. Universities or other higher education institutions 3.47 23.4 13.3 12.9 14.1 20.6 11.3 4.4
10. Government research organizations 3.12 30.6 10.5 13.7 18.5 17.7 6.0 2.8
11. Conferences, meetings 3.69 15.7 15.3 15.3 13.7 21.4 14.9 3.6
12. Fairs, exhibitions 4.39 8.1 9.3 10.9 16.9 25.4 21.4 8.1
13. Professional and industry/trade associations 3.84 13.3 12.5 17.3 17.3 18.5 15.3 5.6
14. Scientific journals and trade/technical publications 3.98 11.3 8.9 15.3 21.0 26.2 13.3 4.0
15. Public databases alien to your firm 2.69 30.2 22.6 19.0 12.1 9.7 5.6 .8
16. Patents 2.84 35.5 16.5 14.1 10.5 12.1 8.5 2.8
Average 3.71 17.0 13.0 15.4 15.6 20.3 13.1 5.6

n¼ 248.
a
Minimum value¼ 1; maximum¼ 7.

Table 2
Descriptive statistics, Pearson's correlations, and variance inflation factors.

Variable Mean s.d. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

1. Performance 4.23 1.10 1

2. Size 4.71 .70 .08 1
3. Age 3.31 .58  .08 .21 1
4. Past performance 3.48 10.43 .02  .12  .02 1
5. Part of a group .60 .49 .14 .26  .01  .06 1
6. Foreign .25 .44 .07 .19 .10  .12 .48 1
7. Exports 3.29 1.39 .11 .06 .09  .07 .05 .08 1
8. Firm R&D 1.55 1.08 .06 .01 .10  .03  .06  .02 .24 1
9. Innovation strategy 4.43 1.18 .11  .04  .02 .13 .03 .01 .11 .25 1
10. Technological diversification 3.86 1.40 .03 .01  .01 .03  .02  .06 .09 .19 .60 1
11. Industry R&D .02 .01 .03 .03  .02 .06 .03  .12  .04 .14  .01  .07 1
12. Industry sales growth  17.46 16.22 .01 .04  .03  .06 .16 .12 .07  .08 .07 .03  .25 1
13. Other environmental instability 1.73 1.18 .14  .10 .04 .04  .02 .01 .01 .03 .04 .00  .30 .45 1
14. Technological dynamism 4.92 1.48 .29 .03 .07  .01 .11 .01 .09 .08 .09  .01 .12  .05 .04 1
15. Search breadth 11.21 3.80 .03 .01 .14 .08  .04  .11  .05 .16 .27 .25 .09 .05 .08 .06 1
16. Search depth 3.00 2.83 .05  .01 .04 .07 .02  .06  .02 .02 .22 .16 .05 .09 .09 .04 .47 1

VIF 1.17 1.12 1.07 1.43 1.40 1.13 1.23 1.78 1.67 1.24 1.43 1.42 1.07 1.45 1.33

n¼ 248.
All correlations above |.16| are significant at p o .01.

measure of external search breadth limiting the coding ‘0’ just
when respondents indicated 1 in our scale revealed no substantial
differences in qualitative terms. We decided to maintain the
measure as described because levels of use and descriptive
statistics of this measure of external search breadth – see
Tables 1 and 2 – are closer to those obtained in previous empirical
research – see Chen et al., 2011; Chiang and Hung, 2010; Laursen
and Salter, 2006). After this coding, the 16 sources were summed,
so we obtained an index of firms' degree of openness to the
external knowledge with respect to search breadth. In line with
previous works using this measure, the variable has a high internal
consistency (α ¼.84).
According to Laursen and Salter (2006: 140), external search
depth is defined as “the extent to which firms draw intensively
from different search channels or sources of innovative ideas”. For
its measurement, we also followed these authors (see also Chiang
and Hung, 2010; and Keupp and Gassmann, 2009) and used the
above described set of answers. In this case, a given source in each
firm within the sample was coded as ‘1’ when the Head of R&D
reported a high degree of use by his/her company (scores 6 or 7 in
the scale), and ‘0’ otherwise (scores 1–5). As in the previous case,
the final measure was obtained by adding these binary variables,
whose result is an index informing from how many external
channels a company intensively obtains new ideas and knowledge.
Again, the degree of internal consistency of this measure is
acceptable and similar to existing empirical evidence (α ¼.76).
3.2.3. Moderator variable
Technological dynamism reflects the speed of change and
instability of technology on a firm's external environment. We
measured this variable through four questions (see Appendix A)
asked to the first informant (CEO). The statements capture on a
seven-point Likert-type scale the speed, depth and unpredictabil-
ity of technological changes occurred on the firm's environment
during the last three years (2009–2011). This scale is based on the
originally developed by Jaworski and Kohli (1993), which has been
widely used in subsequent empirical research for measuring
 J. Cruz-González et al. / Technovation 35 (2015) 32–45 39

technological turbulence (e.g. Atuahene-Gima and Li, 2004; line with prior empirical studies, it can be seen how, on average,
Danneels and Sethi, 2011; Hung and Chou, 2013). After a depurat- external search depth is much less common than breadth, a result
ing phase, the final measure consisted on the average of the scores which provides further support to the above exposed reasoning
on three of the four initial items (α ¼.73). that external search breadth relates to knowledge exploitation,
whereas external search depth relates to knowledge exploration.
3.2.4. Control variables An examination of correlation table reveals that, with the only
The use of cross-sectional data poses the concern that firm and exception of one pair of control variables (innovation strategy and
industry characteristics that are correlated with open search technological diversification), correlations are rather low. In addi-
strategies could affect firm performance. To alleviate this endo- tion, the maximum VIF is 1.78 (including interaction terms), which
geneity issue (Bascle, 2008), as well as to control for other factors is well below the recommended ceiling of 10 (Kutner et al., 2004).
that may influence the estimation results, our analysis included Together, these results indicate that multicollinearity is not a
several control variables for important industry and firm features. serious concern in this study. Notwithstanding, to minimize
Specifically, we controlled for firm size, measured in terms of the potential multicollinearity and to allow for a meaningful compar-
natural logarithm of number of full-time employees. The number ison of the variables measured along different scales, we standar-
of employees was obtained from SABI database. Similarly, firm age dized all independent variables before entering them into the
was measured as the natural logarithm of years since the company regression models. Furthermore, we standardized the variables for
was established. Establishment date was also recorded from SABI. the interaction terms prior to creating the respective cross
To control for the effect of past performance on firm's current products (Cohen et al., 2003).
performance, we included the average return on assets (ROA) Table 3 presents the regression results on firm performance as
during the previous four years (2007–2010). Data on ROA was also dependent variable. Model 1 is the baseline in which only control
gathered from SABI database. In the questionnaire addressed to variables and the moderating variable (technological environmen-
the head of R&D, we asked informants to indicate if their company tal dynamism) are included. Model 2 adds the direct effects of the
was part of a group and, if so, in which country was located its two open search strategies. Finally, in view of our moderation
head office. Based on these responses, we added a dummy variable hypotheses, Models 3 includes the interaction terms among
to control for whether a firm was part of a group, and another one external search breadth and depth and technological dynamism.
to control for whether it was subsidiary of a foreign headquarter. In line with recent evidence (Voudouris et al., 2012), environ-
We also asked heads of R&D to indicate, in average, their firm's mental turbulence seems to have a positive impact on firm
amount of total exports and R&D investments over total sales in performance. The coefficients of technological environmental
the last five years (2007–2011) and created the variables exports dynamism (β ¼.278; po.01) and other environmental instability
and firm R&D as the natural logarithm of (1 þtotal exports to total (β ¼ .222; p o.01) are positive and statistically significant. By
sales) and natural logarithm of (1 þR&D intensity), respectively. contrast, in support of organizational ecologists' reasoning (e.g.
In order to control for the orientation of firms' innovation Sorensen and Stuart, 2000), firm's age appears to have a negative
strategy we included three items (α ¼.73) based on Covin and effect on performance (β ¼  .163; po .05). The effect of some
Slevin (1988) and Zahra (1996) (see Appendix A). We also captured
prior technological knowledge by considering a firm's degree of
technological diversification (α ¼.89). This scale is based on prior
Table 3
research (Cesaroni, 2004; Zhou and Li, 2012) and it comprised of Hierarchical regression analysis.
three items (see Appendix A).
Finally, we added three variables with the aim to control for Dependent variable: firm performance
relevant industry effects. First, as suggested by evolutionary
M1 M2 M3
economics, the search strategy followed by a firm and its potential
benefits may be influenced by the level of technological opportu- Constant 4.231 nnn
4.231 nnn
4.234nnn
nities available in the external environment (Laursen and Salter, Size .105† .104† .115n
2006; Nelson and Winter, 1982; Sisodiya et al., 2013). Accordingly, Age  .147nn  .151nn  .163nn
Past performance .025 .026 .031
we included the average industry's total R&D expenses divided by
Part of a group .098 .103 .115†
total industry sales during the last four years (2008–2011) to Foreign .026 .022 .008
control for industry R&D. Both R&D expenditures and total sales at Exports .089 .091 .103†
two-digit NACE codes were obtained from Spanish Statistical Firm R&D .013 .003  .008
Office. Second, firm performance may be influenced by industry Innovation strategy .080 .091 .117
Technological diversification  .014  .016  .029
evolution. Therefore, we added the average industry sales growth in
Industry R&D .031 .034 .020
the last four years (2008–2011) as control variable. Data on Industry sales growth  .091  .087  .110
industry sales was also recorded from Spanish Statistical Office. Other environmental instability .199nn .203nnn .222nnn
At last, we controlled for other environmental instability by entering Technological dynamism .286nnn .286nnn .278nnn
the standard deviation of the sales growth of firms in the same Search breadth .065 .051
Search depth  .118†  .123n
industry during the previous four years (2007–2010) (Cao et al., Search breadth n Tech. dynamism  .156nn
2009). We calculated this variable from data on total population of Search depth n Tech. dynamism .158nn
this study (1142 firms), which was obtained from SABI database.
R2 .150 .159 .182
ΔR2 .009 .023nn
nnn
F-Statistic 3.183 2.924nnn 3.008nnn
4. Results Durbin–Watson statistic 1.866

Moderated hierarchical regression analysis estimated by ordin- n¼ 248.

Note: unstandardized regression coefficients are reported.
ary least squares was used for testing the proposed hypotheses. In nnn
po .01.
order to check for multicollinearity, we calculated both pair-wise nn
po .05.
correlations and variance inflation factors (VIFs). Table 2 reports n
p o .1.
†
these results and shows descriptive statistics of all variables. In p o .15.
40 J. Cruz-González et al. / Technovation 35 (2015) 32–45
other controls is less robust. In this regard, firm's size seems to
positively affect overall performance, but it is marginally signifi-
cant in Models 1 and 2, and only appears to be statistically
significant in Model 3 (β ¼ .115; p o.1). Even less robust is the
effect of being part of a group and exports intensity. In both cases,
the positive sign of their coefficients is only marginally significant
in Model 3.
Regarding our two main independent variables, external search
breadth has a positive direct effect on firm performance, but it is not
statistically significant. External search depth exhibits a direct negative
effect, only marginally significant in Model 2 (β ¼  .118; p¼.104), that
becomes significant in Model 3 (β ¼ .123; po.1). Hypothesis 1
predicted that technological environmental dynamism will negatively
moderate the impact of external search breadth on firm performance.
In support of this hypothesis, in Model 3, coefficient of the interaction
term between external search breadth and technological dynamism is
negative and statistically significant (β ¼  .156; po.05). Moreover,
using partial differentiation, it is observed that δ performance/δ
external search breadth¼  .156  technological dynamism, which is
zero when technological dynamism is at its mean-standardized value
of zero, is positive for the lower range of dynamism values, and is
negative for the higher range. Results also support Hypothesis 2,
showing a positive moderating role of technological environmental
dynamism on the effect of external search depth on firm performance,
as coefficient of the interaction term between external search depth
and technological dynamism is positive and statistically significant
(β ¼.158; po.05). Partial differentiation indicates that δ performance/
δ external search depth¼  .123þ .158  technological dynamism,
which is zero when technological dynamism is .78. Thus, when
technological dynamism is lower than .78 standard deviations above
its mean-standardized value of zero, an increase in external search
depth has a negative effect on firm performance; only at very high
values of technological environmental dynamism, external search
depth has a positive influence on performance. Importantly, as it
should be the case, inclusion of the interaction terms in Model 3 results
in an increase in explanatory power and model fit (ΔR2 ¼ .023;
po.05).
For a visual interpretation of our results, statically significant
interaction terms are plotted. Following the procedure described
by Aiken and West (1991), plots were derived using unstandar-
dized coefficients. In the graphics, high (low) values of technolo-
gical environmental dynamism are given by two standard
deviations above (bellow) the mean-standardized value. As
Fig. 1a shows, when technological environmental dynamism is
low, external search breadth enhances perceived firm perfor-
mance; in contrast, external search breadth decreases perfor-
mance when technological dynamism is high. On the other
hand, as Fig. 1b indicates, external search depth enhances firm
performance when technological dynamism is high, whereas it
leads to lower performance when technological dynamism is low.
5. Discussion of results
Overall, the empirical results highlight that the technological
regime in which companies are embedded plays a critical role in
determining the effectiveness of the distinct open search strate-
gies. Below we discuss the findings in detail.
First of all, interestingly, our results show that ceteris paribus
none of the two open search strategies has a significant direct
positive impact on overall firm performance. In fact, while external
search breadth seems not to have any effect, external search depth
appears to decrease performance. This finding contradicts the
current wisdom about the positive effects of external knowledge
search that has emerged strongly in recent times from open
innovation literature and related fields (e.g. Chesbrough, 2003;
Low technological dynamism High technological dynamism
5.6
5.2
Firm performanceeee
4.8
4.4
4
3.6
3.2
2.8
-2σ -1σ 0 1σ 2σ
External search breadth
Low technological dynamism High technological dynamism
5.4
5
Firm performanceeee
4.6
4.2
3.8
3.4
3
2.6
-2σ -1σ 0 1σ 2σ
External search depth
Fig. 1. Interactions among open search strategies, technological dynamism, and
firm performance. (a) External search breadth x technological dynamism.
(b) External search depth x technological dynamism.
Escribano et al., 2009; Leiponen and Helfat, 2011; Sidhu et al.,
2007). On the contrary, it echoes conflicting evidence reported by
previous studies addressing the effect of openness on firm perfor-
mance (e.g. Belderbos et al., 2010; Faems et al., 2010; Hung and
Chiang, 2010; Lichtenthaler et al., 2011), and supports recent
claims stressing that the downsides associated to the openness
of a firm's boundaries for seeking external knowledge may be also
considerable and must be taken into account (Dahlander and
Gann, 2010; Huizingh, 2011; West and Bogers, 2014). In this
regard, from a ‘costs versus benefits’ view of openness, our results
indicate that, all things being equal in our sample, the gains of
external search breadth are offset by its cost. However, the costs of
openness discussed in Section 2.1 are exacerbated in the case of
external search depth in such a way that they surpass the benefits
of this search strategy.
This findings regarding the direct effect of both open search
strategies on firm performance, together with the descriptive
statistics showing that external search depth is much less common
than external search breadth, also bring support to the proposed
connection among these strategies and the concepts of exploration
and exploitation. Concerning this, in his seminal paper, March
(1991) argued that exploratory activities have the potential for
extraordinary incomes, but, at the same time, they are costlier and
riskier than exploitative activities, i.e, their returns have higher
variance than those of exploitation. Accordingly, this and other
scholars (e.g. Hill and Rothaermel, 2003) have stressed that,
although the higher variance of its returns makes it possible that
particular exploration activities may outperform exploitation activ-
ities, on average, the higher costs and likelihood of failure of
exploration leads it to yield lower returns than exploitation. In this
paper it is argued – and findings seem to point towards it – that,
due to its shallow nature, firms conducting external search breadth
 J. Cruz-González et al. / Technovation 35 (2015) 32–45
will obtain new pieces of closely related knowledge located in the
surface of external sources that may be useful for refining and
improving their current knowledge-base. This strategy implies
relatively lower costs and enables keeping the company up to date
through incremental adjustments on its technological trajectory,
thus leading firms to be more exploitative-oriented. By contrast, the
more intense links with a variety of sources characterizing external
search depth enable companies to deepen in the knowledge
possessed by the different external parties. Therefore, companies
following this open search strategy are in a better position for
acquiring a wide range of novel and distant pieces of knowledge
that may be combined among them and with the firm's current
knowledge-base, thereby serving as seed for developing new
organizational capabilities (Danneels, 2008) and radical innovations
(Hsieh and Tidd, 2012; Wang and Hsu, 2014). However, as dis-
cussed, the costs of external search depth are very high, thus
making that this explorative-oriented open search strategy will
damage firm performance in most cases.
When testing the moderating role of external technological
regime on the relationship between the two open search strategies
and firm performance, it was found that the effectiveness of
external search breadth and depth is contingent on technological
environmental dynamism in a reverse fashion. Specifically, our
results indicate that technological turbulence negatively moder-
ates the relation between external search breadth and perfor-
mance in such a way that the relationship is positive at lower
levels and negative at higher levels of technological dynamism. By
contrast, we find a positive moderating effect of technological
environmental dynamism on the relationship between external
search depth and firm performance, such that the relationship is
negative at low-to-moderate levels of dynamism and positive
when technological dynamism is very high. This implies that the
greater costs of external search depth are recovered and capita-
lized only in highly technologically dynamic environments in
which prior knowledge becomes rapidly obsolete and investments
in external search breadth are useless, or rather counterproductive
for carrying out the substantive changes required in these turbu-
lent contexts. On the contrary, the incremental improvements
required for addressing the demands of a technologically static
environment can be performed through external search breadth at
a lower cost. This evidence provides further support to the
connection between open search strategies and the explorative–
exploitative orientation of learning discussed above. In this vein, as
it has been argued by prior theorists (Hill and Rothaermel, 2003;
Lavie et al., 2010) and demonstrated by prior empirical research
(Jansen et al., 2006; Uotila et al., 2009), knowledge exploitation is
more adequate in relatively stable environments, whereas adapta-
tion to dynamic environments requires that firms become more
explorative.
6. Conclusion
The issue of open search has become a hot topic in recent
academic research and also in the business world, where firms are
increasingly becoming more porous for seeking knowledge gen-
erated beyond their organizational boundaries. With the aim of
softening the excessive enthusiasm and offering a more balanced
view on this phenomenon, this study has tried to deepen the
understanding of the complex nature of external knowledge
search by organizations. In doing so, relevant literature on the
effects of openness was reviewed and discussed in order to
highlight not only the gains, but also the substantial pains
associated to it. Furthermore, two different open search strategies,
named external search breadth and external search depth, were
identified from the literature and discussed in terms of their
41
connection with the broader learning concepts of exploration
and exploitation.
Based on the above discussion, we developed and empirically
tested hypotheses proposing an opposite contingent effect of open
search on overall firm performance depending on the external
search strategy deployed by the organization. By considering two
distinct components of firms' open search strategies and investi-
gating the different moderating role of technological environmen-
tal dynamism on their effect on firm performance, the findings
reported here complement and extend recent literature (Hung and
Chou, 2013) in showing a more complex contextual dependency of
external knowledge search. The theoretical framework and
empirical findings presented so far have implications for both
theory and practice.
6.1. Implications for research
We derive three major contributions from this study. First, it
contributes to literature on effects of openness in two ways. On the
one hand, by focusing on performance at the firm level as
dependent variable instead of on innovation performance indica-
tors, it contributes to offset the excessive tendency of prior studies
– mainly from open innovation literature – to exclusively focus on
the benefits of external search (Huizingh, 2011; West and Bogers,
2014). As discussed, openness involves significant managerial
challenges and financial and cognitive costs that may exceed the
benefits highlighted in prior empirical research. Our approach has
enabled to ascertain whether the gains of external search in terms
of learning and innovation overcome these costs, so leading to
higher firm performance – as assumed by the optimistic view of
openness –, or not. Together with those obtained by Knudsen and
Mortensen (2011), our findings call for a more nuanced perspec-
tive of external knowledge search in which the enthusiasm for
openness should be tempered by a careful reflection not only on
its potential gains, but also on its pains. On the other hand, this
study extends the scarce empirical works that have investigated
the effect of openness on the overall performance of companies by
considering two separate dimensions of a firm's open search
strategy: external search breadth and depth (Laursen and Salter,
2006), so overcoming the unidimensionality imposed in prior
studies. To date, no previous empirical work has investigated
how different open search strategies relate to performance at the
firm level. This lack is remarkable if we take into account that, as
demonstrated by our results, different external search strategies
entail different costs and give rise to different gains, thus implying
different effects on overall firm performance.
Second, at a more theoretical level, we have based on absorp-
tive capacity arguments (Cohen and Levinthal, 1990) for connect-
ing the concepts of external search breadth and depth with the
broader organizational learning debate on exploration and exploi-
tation (March, 1991). Specifically, we rely on the argument that
firms need prior related knowledge in order to recognize the
value, assimilate, and apply new external information (Cohen and
Levinthal, 1990) and propose that the shallow nature of external
search breadth makes this open search strategy constitute a lever
for achieving local search, or knowledge exploitation. Conversely,
the deeper character of external search depth enables companies
to access and understand a more distant knowledge-base, thus
making this strategy to be associated to distant search, or knowl-
edge exploration. By integrating arguments coming from literature
on open search, absorptive capacity theory, and the exploration–
exploitation debate, this study contributes to connect three
theoretical approaches that, although complementary, have
evolved almost independently in prior research (Laursen, 2012;
Rosenkopf and Nerkar, 2001).
42 J. Cruz-González et al. / Technovation 35 (2015) 32–45
Third and finally, relying on this theoretical linking, the study
contributes to the current research about the context dependency
of external knowledge search by elaborating and testing an
opposite moderating role of technological environmental dyna-
mism on the effect of external search breadth and depth on firm
performance. Although some scholars have claimed for a contin-
gency approach of openness in recent times (di Benedetto, 2010;
Hsieh and Tidd, 2012; Huizingh, 2011; Sisodiya et al., 2013), the
external context dependency of open search effectiveness
remained as one of least understood topics. Hung and Chou
(2013) have pioneered the empirical analysis of a contingent
model of the effect of openness on firm performance. In their
recent study, these authors found that technological turbulence
positively moderates the effect of inbound open innovation on
firms' financial performance, and conclude that external knowl-
edge acquisition is particularly relevant in dynamic environments.
However, they consider and measure inbound open innovation as
a one-dimensional construct. This leaves unresolved the question
of under which environmental conditions the benefits of the
distinct external search strategies surpass their costs, thus making
them profitable or, said simpler, what open search strategy is more
suitable in different environmental contexts. Extending Hung and
Chou (2013) contingent model, our findings lead us to conclude
that, rather than open search is more beneficial in certain
environmental settings, different conditions of the external envir-
onment require that organizations will deploy quite distinct open
search strategies for improved performance. It is at this point
where the present study achieves its intended aim of advancing
one step further in our comprehension of the great – but narrowly
understood – complex nature of external knowledge search in
organizations.
6.2. Implications for managerial practice
Two implications for managerial practice can be derived from
this study. First, contrary to the growing trend of increasing the
degree of openness towards external knowledge in companies, our
study shows that being more open does not necessarily means
better. In fact, our findings indicate that it may be counterproduc-
tive. Searching for knowledge generated elsewhere may be ben-
eficial for improving firm's internal knowledge and processes, but
it also entails important costs that are usually neglected. Managers
should be aware of those related to environmental scanning,
partnering with different agents, knowledge transformation and
integration, changes in corporate culture and employees' attitudes,
blurring managerial attention, and protection of core knowledge.
In the light of the reported findings, when thinking about open-
ness, managers should perform a rigorous analysis about the
benefits, and especially the costs, that it will bring to their
organizations before investing in external search initiatives.
Second, our findings suggest that environmental dynamism is
an important contingent factor that managers have to take into
account when defining their firms' open search strategy. Essen-
tially, our study informs managers about the strategy for external
knowledge search their firms should deploy depending on the
characteristics of the technological regime in which they compete.
In this regard, firms should carefully monitor the technological
dimension of their environment in order to make informed
decisions concerning the deployment of different kinds of open
search strategies. When the environment is characterized by
scarce, predictable and rather minor changes on technology,
external search breadth increases firm performance, whereas
external search depth leads to lower overall performance. As such,
firms in relatively technologically stable environments should
refrain from investing heavily on searching intensively and focus
on searching widely on external channels for information. Only at
very high levels of technological environmental dynamism, when
success – or even firm survival – requires entering into unexplored
knowledge domains, does external search depth make a difference
and the company will capitalize the great investments associated
to this open search strategy. In this kind of high-velocity techno-
logical regimes, external search breadth becomes ineffective for
addressing the major adaptation required by the environment and
will result in diminishing performance.
Managers should avoid the general idea that open search is
always beneficial, and take into account that openness is not a
panacea (Huizingh, 2011). The search activities of different firms
within an industry are subject to great variety and it is difficult for
many organizations to determine the optimal external search
strategy in terms of being broader or deeper, especially in
turbulent situations (Laursen and Salter, 2006). The implementa-
tion of open search strategies should not be oversimplified, and
whereas some degree of openness may be often advisable, there is
no a general answer to the question of how open a firm should be
(Lichtenthaler, 2011). We have tried to shed some light on this
issue by suggesting that selecting and deploying the adequate
open search strategy constitutes a dynamic capability of firms'
external knowledge search.
6.3. Limitations and suggestions for future research
Our work has several limitations that open the door for future
research. First, our findings can only be extrapolated to those firms
that fulfill all criteria used to define our population. Future studies
should investigate how the proposed model works in different
contexts. In this sense, we think it would be interesting to adapt
the analysis to a sample of small-to-medium firms, given their
relevance within the Spanish business arena. In addition, to improve
the gereralizability of our findings, future studies should perform
similar analyses in other industries. Our results indicate that external
search depth increases firm performance only when technological
turbulence is very high in a sample of high-tech firms. Therefore, it
may occur that in low-to-medium-technology industries there is not
enough dynamism to capitalize investments in external search depth.
Consequently, further studies are also suggested to explore the
existence of decreasing returns from both open search strategies in
these contexts in order to find the optimal amount of external search
breadth and depth that maximizes firm performance.
Second, although we followed well established methodological
procedures (e.g. CIS, 2010; De Clercq et al., 2013; OECD, 2005;
Oerlemans et al., 2013) by relying on two different informants,
indicating the time span to which each block of questions was referred
to, and introducing perceived lags among dependent and independent
variables, the nature of the study remains cross-sectional. Thus,
although we took cautions to alleviate simultaneity and reverse
causality concerns, its total avoidance can not be guarantied in
our case.
Third, we have considered the intensity in which firms search for
and acquire knowledge from different external sources, but the
specific organizational modes they use to enter into relationship
with different types of partners remained beyond the scope of the
study. Accordingly, an interesting avenue for future research would
be to investigate how distinct organizational modes (i.e. occasional
collaborations, licensing agreements, or non-equity alliances) con-
tribute to perform search breadth and depth more efficiently.
Fourth, external search breadth and depth may not necessarily
be mutually exclusive strategies within a company. For instance, a
firm may have some units monitoring its technological environ-
ment and, at the same time, establish a separate task force to draw
information from selected channels intensively. In this vein, we
encourage scholars to investigate possible joint effects of external
search breadth and depth. In addition to its implications in terms
 J. Cruz-González et al. / Technovation 35 (2015) 32–45 43

of innovation or firm performance, the simultaneous achievement
of external search breadth and depth may be an antecedent of
firm's ambidexterity (Cao et al., 2009; He and Wong, 2004).
Fifth, this study constitutes a first attempt for investigating the
different effect of open search strategies on overall firm performance
under different environmental conditions. Although we relied on
arguments from prior literature in order to offer plausible explana-
tions, our empirical findings are silent about how this pattern takes
place. Consequently, we recommend future scholars to provide
further insights on this phenomenon. For example, as a more
proximal outcome of external search activities may be the firm's
innovation performance (e.g. Grimpe and Sofka, 2009; Lausren and
Salter, 2006), future studies should try to test how different open
search strategies may affect different facets of the firm's innovation
output (e.g. radical and incremental innovations) and, in turn, the
companies' overall performance. Mediated–moderated models that
extend prior empirical research (see Faems et al., 2010) by including
the role of different dimensions of environmental dynamism (not
only technological) would be useful at this point.
Sixth, we investigate open search strategies. However, research on
external knowledge search and inbound open innovation has high-
lighted that open search can be also investigated in terms of its
orientation or direction, that is, the specific group of sources that
defines firms' search pattern (e.g. Grimpe and Sofka, 2009). The
question about whether distinct external search directions may be
more appropriate depending on the environment in which the
company operates has just begun to be addressed (Chen et al., 2011;
Köhler et al., 2012) and, in our view, constitutes an interesting future
research direction.
Finally, the study focuses exclusively on one dimension of the
process of external learning, i.e., knowledge acquisition through
links with external agents. However, once knowledge is acquired
from an external source, the firm needs to disseminate it thorough
the organization in order to integrate it with its current
knowledge-base (Todorova and Durisin, 2007). Thus, knowledge
integration inside the firm is a key process (West and Bogers,
2014). Future studies should investigate how distinct knowledge
integration mechanisms contribute to assimilate externally
acquired knowledge.
Acknowledgments
We would like to thank the financial support from Spanish
Ministries of Science and Innovation and Economy and Competi-
tiveness (Grants #ECO2009–12405 and #ECO2012-38190), as well
as from “Programa Nacional para la Formación del Profesorado
Universitario (FPU)” of the Spanish Ministry of Education (Grant
#AP2008-00420). Jorge Cruz-González gratefully acknowledges
financial aid from “Programa de Ayudas para Estancias Breves
del Programa de Formación de Profesorado Universitario 2011”
and the hospitality of the Department of Innovation and Organiza-
tional Economics (Copenhagen Business School). Last, but no least,
we wish to thank Joaquín Alegre, Christoph Grimpe, Keld Laursen,
Toke Reichstein, two anonymous reviewers and the Editor-in-Chief
of Technovation for their helpful comments and suggestions made
on earlier versions of this manuscript. The usual disclaimers apply.
Appendix A. Scale items and reliability estimates
See Table A1.

Table A1

Variables and scale items Factor loading and Cronbach's

alphas

Firm performancea, c (α¼ .89)

Please rate your firm's performance in 2011 in relation to your main competitors:
1. Return of sales .775
2. Growth in profit .873
3. Return on assets .838
4. Sales growth .792
5. Market share growth .762
6. Cash flow .779

Technological environmental dynamisma, d (α¼ .72)

Please, indicate the degree in which the following statements describe your firm's main competitive environment during the last three
years 2009 to 2011:
1. The technology is changing rapidly .809
e
2. It is very difficult to forecast where the technologies will be in the next 5 years
3. Technological changes provide big opportunities .759
4. A large number of new products have been made possible through technological breakthroughs .838

Innovation strategyb, d (α¼ .73)

During the last five years 2007 to 2011, your firm's innovation strategy has been characterized by:
1. An aggressive search of new potential opportunities .841
2. A strong emphasis on R&D, technological leadership, and innovation .855
3. A strong tendency for high risk investments with chances for very high rates of return .717

Technological diversificationb, d (α¼ .89)

During the last five years period 2007 to 2011:
1. Our technology portfolio comprises technologies in many different technological areas .897
2. The important technologies of our business units are very different .926
3. We apply technological knowledge from completely different fields of technology .893

a
Questions answered by the first informant (CEO).
b
Questions answered by the second informant (Head of R&D).
c
7-point Likert scale (1 ¼much worse; 4 ¼equal; 7¼ much better).
d
7-point Likert scale (1 ¼strongly disagree; 7¼ strongly agree).
e
Item deleted due to low factor loading and lower internal consistency of the scale.
44 J. Cruz-González et al. / Technovation 35 (2015) 32–45
Table B1
During the last five years 2007 to 2011, how important to your enterprise's innovation activities were each of the following information sources?
1. Suppliers of equipment, materials, components, or software
2. Clients or customers
3. Competitors
4. Other enterprises in your sector that are not direct competitors (e.g. operating in other geographic regions)
5. Other enterprises in other sectors
6. Experts/Consultants
7. Commercial laboratories/R&D enterprises
8. Private research institutes
9. Universities or other higher education institutions
10. Government research organizations
11. Conferences, meetings
12. Fairs, exhibitions
13. Professional and industry/trade associations
14. Scientific journals and trade/technical publications
15. Public databases alien to your firm (e.g. Internet)
16. Patents
a
Questions answered by the second informant (Head of R&D).
b
7-point Likert scale (1 ¼not used/no information was obtained; 7¼ key source/crucial information was obtained).
Appendix B. Sources of information considered for measuring
external search breadth and depth
See Table B1.
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